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Siddhesh Shriapd Mitkar, Pune vs. Income-Tax Officer, Ward - (Income Tax Appellate Tribunal) (01 Jun 2021)

Mere rejection of the explanation does not entail levy of penalty under Section 271(1)(c) of the IT Act


Direct Taxation

The Appellant is an individual engaged in the business of builders and land promoters. Present is an appeal filed by the assessee directed against the order of the Learned Commissioner of Income Tax (Appeals) confirming levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (IT Act).

On mere reading of the assessment order, it is evident that, the Appellant had offered an explanation in support of the sources for the cash deposits. It is stated by the Appellant during the course of assessment proceedings as well as proceedings before the learned CIT(A) that, the cash deposits were made out of the withdrawals made from the bank through ATM. The Assessing Officer as well as the learned CIT(A) had rejected this explanation by holding that, no documentary evidence in support of the explanation was filed. It is not the case of the lower authorities that, the assessee had filed a false explanation as result of which additions were made. It is settled position of law that, mere rejection of the explanation does not entail levy of penalty under Section 271(1)(c) of the Act as held by the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd.

In the light of the above settled position of law, present is not a fit case for levy of penalty under Section 271(1)(c) of the Act. Accordingly, Tribunal directs the Assessing Officer to delete the penalty of Rs.9,51,170. In the result, the appeal of the assessee stands allowed.


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